Senator the Hon Mathias Cormann

ANNELISE NIELSEN: Now, there have been some significant moves in the Australian economy this week, including the release of the national accounts figures. We spoke with the Finance Minister Mathias Cormann, earlier this morning.

So Mathias Cormann thank you for your time.

MATHIAS CORMANN: Good to be here.

ANNELISE NIELSEN: Now we had the third quarter national accounts come out this week. Labor didn’t seem to think it was as good news. They are saying that it shows that the economy isn’t growing as fast as it should.

MATHIAS CORMANN: The Australian economy continues to grow when other economies around the world are shrinking. We are facing some significant global economic headwinds, with several downgrades in the global economic growth outlook. We are dealing with the impact of a significant drought here in Australia. Yet the Australian economy in the September quarter this year, grew slightly more than the economy grew in the September quarter last year. Over the year, economic growth has strengthened since the June quarter, from 1.4 per cent to 1.7 per cent. Of course we want to continue to strengthen the economy further. But in the international context that we are currently in, the Australian economy is actually performing comparatively well. It is certainly performing better than it would have if Labor had been able to implement its high taxing agenda which it took to the last election.

ANNELISE NIELSEN: The thing is though, that the annual growth is only 1.7 per cent. And that is below the Budget forecast. So isn’t this going to have an impact on the promised Budget surplus?

MATHIAS CORMANN: We will be updating all of the economic and other parameters at the half yearly Budget update, which will be delivered in the middle of December. That is done in the usual way. As is always the case, there are movements in both directions. They get reconciled. Employment growth has continued to be stronger than trend and stronger than the Budget forecast. Budget estimates and projections are just that. They are estimates and projections. As you go through the year, you get more and more actual information fed into your revised estimates and projections. That is what we will be doing.

ANNELISE NIELSEN: But on that particular projection, if it is only 1.7 per cent that must be a cause for concern.

MATHIAS CORMANN: There is a range of relevant factors that are relevant for estimates and projections. Nominal growth, employment growth, wages growth, CPI, you name it. All of these get updated at the half yearly Budget update. That information will be published in the middle of December.

ANNELISE NIELSEN: Well, we’re all very excited here at Sky News. The other figure I found quite interesting from the accounts was consumption. Only increasing by 0.1 per cent and 1.2 per cent over the year. Does that show that these tax cuts aren’t going through the way that they are supposed to? If people aren’t spending the money in the economy, it is not helping stimulate.

MATHIAS CORMANN: Not at all. In the end it is up to individual Australians to decide how they spend their money or how they save their money. Saving more, and the savings rate has been going up, that  is also something that is good for the structural strength of the economy moving forward. When it comes to disposable income, in the September quarter, we had a two and a half per cent increase in disposable income. More than five per cent over the year. The increase in disposable income in the last quarter was the biggest increase in more than a decade. That is the effect of our personal income tax relief. What that shows is that people do end up with more of their own money in their pocket. That helps deal with cost of living pressures and the like. But there is nothing wrong with Australians choosing to save to put themselves in a stronger position for the future.

ANNELISE NIELSEN: Now if I can ask you about this big announcement we had from the Prime Minister yesterday, a restructuring of a number of Government departments, five big bosses going as we’re amalgamating these different departments. Isn’t it likely that there would be job cuts though? If you are looking at merging departments, especially to consolidate their back house functions, surely that means that you are going to reduce the number of people in them.

MATHIAS CORMANN: The purpose of all this is to facilitate better collaboration across key policy areas where there are important linkages and to ensure that the government administration is as effective and as efficient as possible. In the end, the decisions in relation to staffing positions are matters for individual secretaries. But the purpose of this exercise, it is not a savings exercise, it is not a cost cutting exercise, it is principally an exercise of making sure that the Federal Government’s administration is as responsive to community needs as possible and is in the best possible position to collaborate in those policy areas and those delivery areas where we need further improvements into the future.

ANNELISE NIELSEN: It’s just where you say efficiencies, doesn’t that mean for your people? Doesn’t that mean you do more with less?

MATHIAS CORMANN: What I said is, of course we want a government administration to be as effective and as efficient as possible. Of course we want that. In the end, the decisions in terms of allocations of job positions, that is a matter for individual secretaries. Are you suggesting that we should aspire to have a less efficient public administration? Is that the purpose of the question?

ANNELISE NIELSEN: No, no. I was just asking, you said part of the purpose of these amalgamations was to have a more efficient way of administering the government. So does that not mean doing more with less?

MATHIAS CORMANN: Actually, I said a little bit more than that. I said that what this is all about is making sure that the Federal Government’s administration across policy and service delivery is in the best possible position to respond to the evolving needs of the Australian people, but also in a better position to collaborate across key policy and service delivery areas. We do want the Australian Government’s administration to be as effective and as efficient as possible and in the best possible position to respond to evolving community needs.

ANNELISE NIELSEN: Ken Henry has done an interview with RN Breakfast this morning. He’s talked about the tax system and the need for reform. In particular he has said people are going to lose out really big time if we don’t have significant tax reform. Do you think that this is the time for the Government to be looking at a complete overhaul of the tax system?

MATHIAS CORMANN: We have pursued the most significant reform to our personal income tax system since the early 1990s. Under our tax reforms, legislated in two waves, 94 per cent of Australians will not pay more than 30 per cent of tax on any of their income. We got rid of an entire tax bracket. We have also made various other adjustments which not only deal with bracket creep, but also simplify the tax system moving forward. We are always reviewing what else can sensibly be done. But that is what we do in the lead up to every Budget and every Budget update.

ANNELISE NIELSEN: Just finally, we are at the end of the year. When you look back at what’s happened this year, did you expect what you’ve seen so far? Has it been the year you thought?

MATHIAS CORMANN: The first challenge early in the year was to ensure that we secured the confidence of the Australian people so that we could continue to serve them in building a stronger economy and creating more jobs, making sure that Australians can be as safe and secure as possible. Ultimately, perhaps against expectations in some quarters, we were able to achieve that. Since the election, we have worked very hard to deliver on the agenda that we took to the election. We have legislated a further $158 billion worth of income tax relief. We have legislated for improvements to the Farm Household Allowance to provide better support to drought-affected communities. We have established the Future Drought Fund. We have legislated our measures to address misconduct in the energy market to bring down electricity prices. We have legislated more free trade agreements to help our exporting businesses to sell more Australian products and services around the world. This week we were able to repeal Labor’s bad medivac laws which had weakened our national security arrangements. We are just getting on with the job, working hard, doing everything we can to put the Australian economy on the strongest possible foundation and trajectory for the future, but also making sure that we maximise the strength of our national security arrangements.

ANNELISE NIELSEN: You didn’t quite get ensuring integrity over the line though. What are you going to be doing to make sure that that does pass next year?

MATHIAS CORMANN: The vote on that in the Senate was stronger than the first time round. It was a draw this time round rather than a straight loss. It has been passed by the House of Representatives again yesterday and will come to the Senate early next year. We will be working over the summer to gain the support of that one additional Senator or two additional Senators that we require in order to secure its passage.

ANNELISE NIELSEN: Mathias Cormann, thank you for your time.

MATHIAS CORMANN: Always good to talk to you.